Economics Supply Curve Quiz

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Questions and Answers

What happens to the supply curve when the input cost of a good increases?

  • The supply curve remains unchanged.
  • The supply curve becomes steeper.
  • The supply curve shifts to the right.
  • The supply curve shifts to the left. (correct)

How does an increase in government subsidies affect the supply curve?

  • It causes the supply curve to become steeper.
  • It shifts the supply curve to the right. (correct)
  • It shifts the supply curve to the left.
  • It causes the supply curve to become flatter.

Which of the following is NOT a determinant of supply shift?

  • Technology
  • Government regulations
  • Consumer preferences (correct)
  • Producer expectations

If a company expects a decrease in the price of its product in the near future, what is likely to happen?

<p>They will decrease production to avoid losing money when prices drop. (A)</p> Signup and view all the answers

What is the relationship between the price of a good and the quantity supplied according to the law of supply?

<p>As price increases, quantity supplied increases. (B)</p> Signup and view all the answers

Which of the following best describes a positive externality?

<p>A new park is built, increasing property values in the surrounding area. (A)</p> Signup and view all the answers

What is the main goal of government safety nets?

<p>To reduce the number of people in poverty. (A)</p> Signup and view all the answers

Which of the following is an example of how the government can decrease negative externalities?

<p>Investing in public transportation to reduce car emissions. (D)</p> Signup and view all the answers

What is the relationship between taxes and welfare programs?

<p>Taxes are used to fund welfare programs. (B)</p> Signup and view all the answers

What does the law of supply state?

<p>As the price of a good increases, the quantity supplied increases. (A)</p> Signup and view all the answers

Which of the following best describes the poverty threshold?

<p>The amount of money a household needs to cover basic necessities. (C)</p> Signup and view all the answers

What is the primary motive for firms to produce goods?

<p>To maximize profits. (A)</p> Signup and view all the answers

What does ceteris paribus mean in the context of the supply schedule?

<p>All factors except price remain constant. (C)</p> Signup and view all the answers

Which of the following is NOT a variable factor that can affect supply?

<p>Consumer preferences for the good (D)</p> Signup and view all the answers

According to the Market Supply Schedule for Gobstoppers, at what price will 200 boxes of Gobstoppers be supplied per day?

<p>$1.50 (A)</p> Signup and view all the answers

If the price of a box of Gobstoppers increases from $1.00 to $1.50, what is the likely effect on the quantity demanded per day, according to the individual demand schedule?

<p>The quantity demanded will decrease. (C)</p> Signup and view all the answers

According to the concept of Ceteris Paribus, what factor remains constant when analyzing the relationship between price and quantity demanded on a demand curve?

<p>All other factors besides price. (C)</p> Signup and view all the answers

What does the market demand schedule illustrate about the relationship between the price of a product and the quantity demanded?

<p>An indirect relationship: higher prices result in lower quantity demanded. (C)</p> Signup and view all the answers

What is the main reason behind the downward slope of the demand curve, as explained by the law of diminishing marginal utility?

<p>Consumers tend to get less additional satisfaction from each additional unit consumed. (C)</p> Signup and view all the answers

What type of demand schedule shows the amount of a product demanded at various prices by all customers combined?

<p>Market Demand Schedule (C)</p> Signup and view all the answers

What does a shift to the right of the demand curve indicate?

<p>Increase in demand (D)</p> Signup and view all the answers

What factor causes the demand for normal goods to increase?

<p>Increase in income (D)</p> Signup and view all the answers

Which of the following factors does NOT affect demand curve shifts?

<p>Weather conditions (B)</p> Signup and view all the answers

Which type of goods see a decrease in demand as income increases?

<p>Inferior goods (D)</p> Signup and view all the answers

Which of the following best describes complements in the context of demand?

<p>Goods that are used together (B)</p> Signup and view all the answers

What does the principle of Consumer Sovereignty indicate?

<p>Consumers have the ability to influence production through their purchases. (C)</p> Signup and view all the answers

Which of the following is NOT a characteristic of Public Goods?

<p>Pay-per-use (A)</p> Signup and view all the answers

Which economic right allows individuals to control their own property?

<p>Private Property (A)</p> Signup and view all the answers

What is a potential consequence of market failures?

<p>Free riders benefiting without payment. (D)</p> Signup and view all the answers

What is meant by the principle of Free Contract?

<p>Individuals can decide the agreements they enter into. (A)</p> Signup and view all the answers

What does the term 'standard of living' refer to?

<p>The overall quality of life in a country (B)</p> Signup and view all the answers

What is the key role of technology in a free enterprise system?

<p>Increasing productivity and contributing to economic growth (A)</p> Signup and view all the answers

Which principle of free enterprise is best exemplified by the ability to start a business?

<p>Open Opportunity (B)</p> Signup and view all the answers

What is the most important goal associated with the 'Profit Motive' in free enterprise?

<p>Increasing financial efficiency and responsibility (D)</p> Signup and view all the answers

What does the graph indicate is a positive sign for a nation's economy?

<p>An increasing GDP per capita (C)</p> Signup and view all the answers

What is the main reason why a demand curve slopes downwards?

<p>A combination of the income and substitution effects (B)</p> Signup and view all the answers

Which of these is NOT a reason why a demand curve shifts to the left?

<p>A decrease in the price of the good itself (B)</p> Signup and view all the answers

What is the impact of a price increase on a consumer's purchasing power?

<p>Purchasing power decreases (C)</p> Signup and view all the answers

What is the difference between 'demand' and 'quantity demanded'?

<p>Demand is the entire relationship between price and quantity, and quantity demanded is a specific point on the demand curve. (C)</p> Signup and view all the answers

What is the relationship between cereal and milk?

<p>They are complements, meaning that a decrease in the price of one would lead to an increase in the demand for the other (D)</p> Signup and view all the answers

Flashcards

Demand Curve

Graph showing the relationship between price and quantity demanded.

Substitution Effect

Consumers switch to cheaper alternatives when prices rise.

Income Effect

Price changes impact consumers' purchasing power.

Downward Sloping Curve

Illustrates that lower prices lead to higher demand.

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Complimentary Goods

Items that are often purchased together (e.g., cereal and milk).

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Standard of Living

The level of economic prosperity experienced by individuals or communities.

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GDP

Gross Domestic Product; a measure of a country's economic performance and growth.

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Profit Motive

The drive to make money as the main goal of businesses.

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Open Opportunity

The principle that anyone can start a business in the marketplace.

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Technological Innovation

The introduction of new technologies that enhance productivity and GDP.

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Law of Diminishing Marginal Utility

As consumption increases, additional satisfaction decreases.

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Demand Schedule

A table showing the amount of a product demanded at various prices.

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Market Demand Schedule

Total quantity demanded at various prices by all customers.

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Ceteris Paribus

Assumes all other factors are constant except price.

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What is Supply?

The amount of goods available for sale in the market.

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Law of Supply

As the price increases, production and quantity supplied also increase.

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Quantity Supplied

The specific amount of a good that is supplied at a certain price.

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Supply Schedule

A table that shows the relationship between price and quantity supplied while holding other factors constant.

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Supply Curve

A graph that illustrates the relationship between the price of a good and the quantity supplied.

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Externality

Cost or benefit of a good/service affecting others not involved in production/consumption.

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Positive Externality

A benefit of a good/service experienced by others (e.g., home renovation increases neighbor's property value).

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Negative Externality

A cost of a good/service that negatively affects others (e.g., foreclosure reduces neighbor's property value).

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Poverty Threshold

Income level too low to support a household, defined by government metrics.

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Redistribution

Tax revenue is allocated to welfare programs to support individuals in poverty.

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Supply Curve Shift

A graph showing price vs. quantity supplied, with two curves shifting left and right.

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Determinants of Supply

Factors that cause the supply curve to shift left or right, such as costs and regulations.

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Input Costs

The costs of materials needed for production; lower costs increase supply, higher costs decrease it.

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Government Regulations

Interventions like taxes or subsidies that affect supply; taxes increase cost, while subsidies lower it.

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Private Property

Individuals have the right to control their own property.

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Consumer Sovereignty

Consumers dictate the production of goods and services through their purchases.

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Public Good

A service that is non-rivalrous, non-excludable, and funded by taxes.

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Competition

Business rivalry that leads to more choices and fair prices for consumers.

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Free Riders

Individuals who benefit from public goods without contributing to their cost.

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Demand Shift Right

Indicates an increase in demand for a good.

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Demand Shift Left

Indicates a decrease in demand for a good.

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Normal Goods

Goods that see increased demand as income rises.

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Inferior Goods

Goods that see decreased demand as income rises.

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Study Notes

Externalities

  • Cost or benefit of a good or service that goes to someone who did not produce or consume that good or service
  • Positive Externality—a benefit (e.g., you renovate a run-down house and your neighbors' property value increases)
  • Negative Externality—a cost (e.g., your house is foreclosed on and your neighbors' property value decreases)

Goals of Government

  • Goals: Stability
    • Avoid drastic price shifts
    • Health—regulate banks
    • Adjust interest rates
  • Goals: Growth
    • Economy grow—for people to increase their standard of living
    • Standard of Living—level of economic prosperity
    • GDP is an indicator of growth

Technology

  • Technology is the process of production
  • Technological innovation increases productivity, which increases a nation's GDP

Free Enterprise

  • Market controls productivity and distribution with minimal government interference
  • Labor is divided (specialization)
  • Everyone's wants and needs are satisfied through self-interest

Principles of Free Enterprise

  • Profit Motive
    • The main goal is to make money
  • Encourages efficiency and financial responsibility
  • Open Opportunity
    • Anyone can start a business (compete in the marketplace)
  • Enables economic rights

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